Question

The generally accepted accounting principle of consistency states that: ?

1) an operation should use the same accounting methods for preparing tax returns and financial statements.
2) multi unit organizations should use the same accounting methods for all properties in the chain
3) once an accounting method has been adopted, it should be used period to period
4) all of the above

Answer 1

The principle of consistency in accounting states that once an accounting method has been adopted, it must be used consistently in subsequent periods, ensuring the comparability of financial information over time.

Step-by-step explanation:

The generally accepted accounting principle of consistency requires that once an accounting method has been chosen, it should be used from one period to the next. This helps ensure comparability of financial information over time. Therefore, the correct answer to the question is (3) once an accounting method has been adopted, it should be used from period to period. While consistency is also important across different units of a multi-unit organization and there should be some degree of alignment between methods used for tax purposes and financial reporting, the principle of consistency specifically insists on using the same accounting method within an entity over different periods unless there is a justified reason to change.